EUR/USD risks a drop to 1.2055 – UOB

In opinion of FX Strategists at UOB Group, EUR/USD could extend the downtrend to the mid-1.2000s in the next weeks.

Key Quotes

24-hour view: “We did not anticipate the sharp sell-off in EUR to 1.2116 yesterday. While the sharp and rapid decline is oversold, strong downward momentum suggests that EUR could weaken further to 1.2095 (minor support is at 1.2110). Resistance is at 1.2150 but only a break of 1.2165 would indicate that the downside risk has dissipated.”

Next 1-3 weeks: “We have expected EUR to trade between 1.2150 and 1.2265 since the start of the week. Yesterday (03 Jun, spot at 1.2210), we indicated that EUR has to ‘close below 1.2150 or above 1.2265 before a sustained directional move can be expected’. However, we did expect the sharp drop during NY session that sent EUR to a low of 1.2116 and the subsequent weak close at 1.2124 (-0.70%). Strong downward momentum is likely to lead to further EUR weakness to 1.2095. There is scope for the weakness to extend to 1.2050 but at this stage, the prospect is not high. Overall, EUR is expected to stay under pressure as long as it does not move above the ‘strong resistance’ at 1.2200.”